wtf wtf wtf

Well, the market's dumping. Why is the

market dumping? We got the answer for

you. It's because of this news out of

Oracle, and it's absolutely

bad. It is the second shot heard around

the world for the AI play, which is

basically the only thing that is

propping up GDP right now. It's not

great. I'm going to break down exactly

what's going on and why it's the second

dot heard around the world. Mind you,

this is coming from a company named

Oracle, which in case you don't recall,

Oracle is a person or thing regarded as

an infallible authority or guide on

something. Some would say like a seer or

like a, you know, a somebody who can

give divine or prophetic advice.

basically suggest a prophecy of what's

to come. You know, there's another

oracle known as the Oracle of Omaha who

also tells us that the stock market is

the most overvalued by 217% on the

Buffet indicator that it has ever been

in the history of market valuations.

Mind you, that snapshot is from June

30th. And let's just say we're up from

June 30th, so we're even more

overvalued.

All that notwithstanding, let's talk

about the two shots across the bow

and the shots heard around the world.

So, first you need to understand this

fancy piece of crap document called an

8K. It's another word for a current

report. Okay? It's basically a company

telling you, "Yo, we got some news.

We're just going to drop this here and

boom, it's been disclosed to you." So,

it's just a way for companies to cover

their legal basis for their disclosure

requirements. All right, fine. So,

what's in this disclosure that's so

fancy? Well, here you go. Okay. Material

service agreement. This bottom line,

we've talked about it before, so I'm

going to give you a very quick reminder.

This is a document that was filed about

30 days ago. H like 28

days ago. 28 days ago. Coreweave told us

that Cororeweave is forcing Nvidia to

buy unused

leases for Coreweave data centers that

are operated by or using Nvidia chips.

Now, the only way out of this is

bankruptcy. So in other words, Nvidia is

going to pay. Nvidia is going to pay to

buy back unused capacity at Core Reef

data centers all the way until 2032,

which is crazy. That's a long time. I

immediately made a video on this. I go,

"This is a shot to AI. This is bad." The

problem is a full copy of the material

services agreement will not be released

until after the next earnings report,

which we think will be November 12th.

though some have been saying the 14th.

So somewhere we'll we'll know as we get

closer. Somewhere between November 12th

and 14th. Mark your calendar for it. It

is a big deal. Okay? Because when this

came out, I made a video and said, "Hey,

this is a really big red flag because it

suggests that leasing out data centers

has no pricing power." And I made it

very clear that this is poopy dupy and

that we don't want poopy dupies. that we

want a frankly okay like as an owner of

Nvidia stock I just want Nvidia stock to

go up okay like there's that's that half

of me that's like please just make

Nvidia stock go up okay I like AI boom

the AI boom's great it's supporting our

GDP is fantastic but that's not the

analyst side the analyst side says this

is a big red flag to PP it means that

renting out data centers don't have

pricing hour. Now, what did we learn

today and why did the market tank today?

Well, the market tank today because

Oracle, who's a heavily indebted

company, just came out and gave us some

numbers that suck.

So, over the last 3 months, Oracle has

generated $900 million in rentals of

servers. Their executives told us that

in the future them renting servers to

OpenAI would generate $381 billion of

revenues.

That's

105

times how much money they're making

currently from the rentals of servers.

So the executives are like, "Yeah, we're

making $900 right now. Uh that's

actually going to be uh 381,

you know, thousands uh or we're making

$900 per quarter. So that's like 300

$3,600 per uh year. Uh yeah, that's

actually going to 100x in the future. Uh

trust us, bro.

Okay. Well, great. So then of course

Oracle skyrockets on the news, but now

we're getting internal leaked

information that while Oracle on that

$900 million sees a $125 million like

gross profit, which is about a 14% gross

margin,

Oracle actually lost $und00 million

renting out Blackwell chips, which are

supposed to be the latest and greatest

chips from Nvidia, which supposedly have

all of this insane demand. Now maybe for

a cashrich company that's not that big

of a deal. It would just be considered

the cost of doing business. But then

when we actually look at the balance

sheet for Oracle, we start getting a

little bit concerned. And I've warned

about this on the channel before that

Oracle is one of the highly indebted

ones. And I've actually applauded Amazon

for not being as highly indebted as

Oracle. And this is, you know, what's

leading the market to tank today, right?

Uh the problem is Amazon

literally today said they are opening

new lines of credit with banks to

finance more AI investment. I'm like ah

not them as well. Okay. Anyway, so

everybody's taking on debt, but I want

you to look at this balance sheet and

tell me what this balance sheet looks

like to you. Tell me if this is good.

They have $19 billion to pay bills. So,

imagine you had $19 in your bank account

and then you had $27 of bills to pay

this year. Well, you know, in the next

12 months, that means you're upside down

already. Okay? They've got $27 billion

in bills to pay. They've got $19 billion

in cash and receivables, assuming they

actually get all these receivables. Keep

in mind, in their current liabilities,

I'm excluding deferred revenues that

they've already counted. Now, on top of

that, they have about $100 billion of

debt. not including their leases.

So, they're already heavily in debt. On

top of that, when you look at their cash

flow statement, yes, they currently have

cash flow from operating activities, but

they're spending more than all of it. If

you look at their free cash flow by

taking this number and then subtracting

their capex, they're actually negative

$400 million in 3 months on free cash

flow. So, we're negative free cash flow.

How are we coming up with that money?

We're taking on $800 million more

financing in just 3 months. We're

issuing $1.1 billion of stock. So,

they're diluting their investors.

Uh, and they're using some of it to pay

dividends and the rest to finance their

negative free cash flow because they're

so in debt. So, this is not like a very

financially sound company even though

it's massive, which is kind of scary.

It's almost gets to like too big to fail

level. So then you look at their

margins. Their margins have collapsed

240 basis points from last year. Last

year they net about $2.9 billion, which

what you'll notice is exactly the same

as what they net this year. See, 2.9

billion, 2.9 billion, right? But wait a

minute, what was the revenue? Oh my

gosh, last year was 13.3 billion. Now

it's 14.9

and they net the same. So their revenue

blew up, but they net the same. That's

because margin's collapsing. Okay, why

is margin collapsing? They can't make

money on these damn data centers, which

is bad because remember the circular

arrangement we talked about yesterday?

Let me show you a picture of

the circular

scam.

Oh, sorry. I actually meant to pull up

my iPad a bit to remind you all of the

circular nature of the relationship that

we talked about yesterday which is only

amplified mind you by the amount of

deals that open AAI is doing. Look at

this chart from the information just to

understand how critical open AAI here

is. Open AAI has a deal with SoftBank

has a deal with Oracle who have deals

with Nvidia and OpenAI also has a deal

with Nvidia. Nvidia has deals with

Cororeweave. Cororeef has deals with

Nvidia, mind you, to lease back unused

chip capacity. You've got deals with

Microsoft who has deals with Coree. And

OpenAI also has deals with Microsoft.

OpenAI has chip deals with Broadcom to

make a custom chip. OpenAI has deals

with Google. Uh oh, Google has deals

with Anthrope. Google has deals with

Meta, Amazon with Anthrop. And of

course, OpenAI with Amazon. Uh, and

I don't know what's missing here.

Thanks, Financial Times. Sandbagging me

here. But anyway, the point is

all of this is fuel to the fire that

Oracle is now losing money on these

rentals when we look at this, which is

like this disastrous circle. But

understand, I'm going to simplify this,

okay? Nvidia invests a billion dollars

for every gigawatt deployed into OpenAI.

So OpenAI gets money when they deploy a

gigawatt. Okay. In the second half of

next year, OpenAI is going to have their

first gigawatt deployed, which is when

Nvidia is going to give OpenAI $10

billion. So in the second half of next

year, Nvidia gives OpenAI $10 billion.

After they get that $10 billion, in the

second half, AMD says they're going to

begin their data center deployments with

the money that OpenAI

has to spend on AMD chips.

And then of course AMD will get revenues

which will lead AMD stock to go up which

open door or sorry open AAI owns shares

of warrants of

and Nvidia benefits from the value of

OpenAI going up because it gives OpenAI

more capital to spend money on Nvidia

chips as well. It's insane. Okay, that's

just a reminder from yesterday. Add that

to the news that we got today from the

information. It's not good. So

understand that Oracle is now seeing

losses of a hund00 million from renting

Blackwell chips. That's crazy. There's

also no standard on the depreciation for

these products, which is also not good.

Understand that depreciation, and I've

made videos on this, is fantastic to add

back in when prices are going up, but

these are depreciating assets. chips are

going to go down in value over time.

Over the long term, a chip goes to zero.

Like I I just want to make this like

critically clear, okay? Anything like a

chip, a car, right? These things go to

zero over time. So, uh let's write that

down here. Let's go. Um, let's write

down ships,

AI, or I shouldn't say AI, uh, cars,

planes,

boats,

butter,

you know, for those of you who are

course members and understand what that

is. All of this trends down

to zero over time. It goes it always

goes to zero. That's what history tells

us. Okay? There's there's no there's no

debating that these things go to zero

and so you depreciate them to take them

to zero. Of course, then you know people

add back in depreciation but they're

like because they're like oh value. The

only place it makes sense to add back in

depreciation

is real estate

because houses over time are an

inflation hedge that go up in value. All

right? They hedge inflation. they remove

you from the dollar, right? So, housing,

it makes sense to add back depreciation

because it goes up over the long term.

Everybody over here adding back in

depreciation for a depreciating asset is

losing their mind and there is no

standard definition of what's going on

with depreciation at these companies.

Now, why is that a problem? Well,

because Oracle themselves uh via this

leaked information on depreciation, let

me show you. Take a look at this. Here

we go. 14% gross margin, which is them

just taking the 120 million of gross

profit divided by 900 figures about a

14% gross margin, which mind you is is

lower than Oracle's net right now,

right? Oracle's net margins. The more AI

data centers they do, the more their net

margins are going down. Their net margin

right now is 19.6%. Right? Their gross

margin on AI chips is 14%. But that

doesn't include potentially another 7%

of depreciation that they could include

and but there's no standard definition

on how people calculate this. So it's

crazy. These are apparently internal

documents uh from Oracle. And so it's

all a fugazi Like let me let

me sorry I shouldn't say bad ones but

and and mind you like I'm losing money

right now. Okay. Like this is this sucks

dude. What is like you see this? You see

Nvidia down 50 basis points. Bro, that's

costing me money by the second film.

Like honestly we were filming like

looking at this information like right

here on the live stream and I'm like oh

this is really bad for Nvidia. Like I

could have sold right here. I just lost

another three bucks per share at, you

know, over 13,000 shares or whatever I

got. So like, damn me. But I must make

this video.

It's okay. It's okay. So like I I want

to shill AI.

But my nature is I got I got to tell the

world what I'm seeing. And when I see

bull crap, I'm going to talk about the

bull crap. And so here's the thing,

okay? You have to understand that these

companies earnings are fugazed. Okay,

here's how. I'm going to show you the

fugaze how it works. Okay, watch this.

Watch this. So, uh I'm going to go

pretend I'm Microsoft, let's say. Okay,

this is

uh fake. Don't sue me, bro. Example

given. Okay, do people understand what

EG is? It stands for example given.

Okay, if you just learned something, hit

subscribe. Oh my gosh, dude. I need I

need Alamo coffee for this. Remember the

Alamo.

All right, this is important.

So, fake numbers. Don't sue me, bro

Microsoft. So, hey guys. Uh we just

spent

uh10

billion dollar

on Invenia chips

and our data center build out. Yeah.

Yeah.

>> Oh, guys, guys, guys. Uh we just made

um

I don't know, let's go with uh we just

made,

how do we want to put it? Uh, let's just

say, I don't know, let's just say they

made $2 billion. We just made $2 billion

in revenue, you know, recurring revenue

or what, right? Well, technically,

you know, you and I on a cash basis,

we're like, "All right, so you just

spent $10 billion on chips to make 2

billion. You just lostg

billion, right?" But that's not how it

works because these companies say,

"Well, these $10 billion of chips, we're

actually going to depreciate them over 7

years. So, we're only going to expense

these to the tune of $1.4 billion."

So, actually, guys, we didn't just lose

$8 billion on a depreciating asset that

Oracle can't even rent out for a profit.

We actually

made $540 million

cuz we're top G's, bro.

So, so you literally have these

companies today. Literally Micros,

they're all doing it. Microsoft, Meta,

Amazon, dude, our entire GDP

is is like based on these knuckleheads

right now. And these are like toothpick

foundations, okay? They're going, "Guys,

we just spent all this money on stuff

that's going to lose value if God g. But

don't worry, my uh accounting."

So, like I said, like when I see stuff

like this to win big deals with AI

customers, Oracle and other cloud

providers were offering heavy discounts

on GPU prices and Azure is seeing uh

margin pressures at Microsoft because

companies have to price so aggressively.

And on top of that, when I see

utilization is trash. Where was it?

Utilization. Utiliz here. utilization of

Oracle's GPU servers range between 60

and 90%.

That's bad.

That's bad. Like, understand this, okay?

Uh, house attack is at 100% occupancy.

Our tenants pay rent and I get pissed

when properties are vacant. Obviously,

when we're renovating properties,

they're vacant and the goal is rent them

out as soon as possible. Now, most

apartment buildings operate at like 92

to 94% occupancy. So, you have a vacancy

factor you included. Okay, that's like

apartment building world 92 94%. You

know, we're at 100% on our apartment

buildings. But

the utilization for these chips which

can run 247 and aren't reliant on people

is between 60 and 90%. So take the

midpoint 75%.

That's horrible. That means 25% of the

time all these data centers that you

currently have on average are doing

nothing.

Which is really interesting because if

25% of the time the data centers you

currently have are doing nothing, why

are we building so many more?

And this is where the problem comes.

Because if all of a sudden we're like,

you know what? We don't need to build

anymore. Here's how it all collapses.

It's like we're writing the 2026

textbook on the collapse. Here's how it

works. Nvidia invests $10 billion into

OpenAI for every gigawatt deployed. Oh,

but wait a minute. What happens for a

moment? What happens if we don't get

that gigawatt deployed? Oh no, no

deployment. Oh crap.

Okay. Well, wait a minute. Then that

means Open AI won't get their $10

billion from Nvidia. Gone. Which, wait a

minute. That means Open AI doesn't have

the money to invest in AMD to begin the

AMD buildout. Oh crap. Which means AMD

doesn't get the money. Which means

Nvidia doesn't get the revenue.

Which means Nvidia,

oh crap, can't invest anymore,

which means that OpenAI stock or that

AMD stock isn't going to go up, which

means OpenAI doesn't have more money,

which means no more more Nvidia.

Oh crap. I'm left with a shell. Why not

advertise these things that you told us

here? I feel like nobody else knows

about this. We'll we'll try a little

advertising and see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.